©2019 International Transaction Journal of Engineering, Management, & Applied Sciences & Technologies International Transaction Journal of Engineering, Management, & Applied Sciences & Technologies http://TuEngr.com Paper ID: 10A09E IMPORT SUBSTITUTION PROCESS IN THE RUSSIAN ECONOMY IN THE CONTEXT OF INTERNATIONAL SANCTIONS: ISSUES OF THEORY AND PRACTICE L.E. Namyatova a* a Ural Federal University, Ekaterinburg 620002, ul. Mira, 19, RUSSIAN FEDERATION A R T I C L E I N F O A B S T R A C T Article history: The relevance problem of import substitution is explained with the Received 01 May 2019 practicability of using a systematic approach to analyze the real state of Received in revised form 21 June 2019 the Russian economy. This article provides a brief historical background Accepted 04 July 2019 on the origin of the idea of import substitution in the XVIII century and Available online 12 July 2019 its further development. It considers its essence as a response to Keywords: international sanctions imposed by the USA, the EU, and their allies. High-tech investment; Noting that import substitution should be distinguished from International sanctions; protectionism, which is based on different aims. The mechanisms of protectionism; import substitution by three main categories are indicated. There is a list Mechanisms of import of rules that must be followed when developing strategies for import substitution; Strategy of substitution. The article highlights the negative effect of the sanction import substitution; imposition, reflected on the Russian foreign trade in 2016–2017, Domestic technology compared to 2013, as well as on the supply of high-tech investment development. products. Also, it gives particular examples of the current situation in some spheres of economic activity and identifies threshold requirements in industrial production in the world practice and Russia. Focusing on the effective re-equipment of the Russian economy, it is necessary to manufacture competitive labour tools in a certain order: from the production of labour tools for the machine-tool industry to their production for the engineering industries and to the production for other sectors of the economy. Attention should be paid to the quality of the workforce capable of servicing advanced technologies and equipment. There are tasks whose introduction will contribute to a successful solution of the problem of import substitution. The aim of this article is to identify "bottlenecks" in the development of the Russian economy and suggest measures to eliminate them, focusing on its essential components. Particular measures to increase the real potential of the country are suggested. © 2019 INT TRANS J ENG MANAG SCI TECH. *Corresponding author (L.E. Namyatova). E-mail: [email protected] ©2019 International Transaction Journal of Engineering, Management, & Applied Sciences & Technologies. Volume 10 No.9 ISSN 2228-9860 eISSN 1906-9642 CODEN: 1 ITJEA8 Paper ID: 10A09E http://TUENGR.COM/V10A/10A09E.pdf DOI: 10.14456/ITJEMAST.2019.112 1. INTRODUCTION Perhaps not all identified drawbacks in the development of the Russian economy can be leveled by import substitution, but this process is a key to restoring the sovereignty of the domestic economy. The scientific problem of the article is devoted to the development of a more complete picture of the specific nature of import substitution in Russian conditions, in contrast to protectionism, which is unthinkable without new industrialization and is its immediate priority. Aim of the study. Clarification of specific features of import substitution policy, the result of its introduction will be domestic competitive products and an increase in volumes of knowledge-intensive and high-tech products. Tasks of study. - Analysis of the components of the policy of protectionism and import substitution. - Justification of proposals for a successful solution of problems on import substitution in the economy. 2. METHODOLOGY The novelty of the research is in reviewing the priorities in the national policy caused by the sanctions pressure of Western countries and the search for new ways of economic development of Russia. The article considers clarification of peculiarities of import substitution in theoretical terms. A systematic approach was used on the basis of a dialectical method of studying objects. Mathematical-statistical methods were used. The theoretical and practical importance of research. The peculiarities of import substitution were suggested on the basis of summarizing the research of scientists, which can be used in the development of economic science. The materials of the work can be used by universities in training and retraining of technical and economic specialists. The results of research of Russian and foreign scientists were used in this article. The Russian scientists who worked on this problem are A.I. Altukhov, S.Afontsev, A. Babkin, M. Brazhnikov, N.Vodomerov, B.Zamarayev, H.Karchayev, T. Marshova, L.Namyatova, R.Nureev, L. Orlenko, A.V.Petrikov, B.Rakhaev, E.G. Safronov, A.N. Semin, V.Uzun, V.Faltsman, A.Shiryaev, A.Shutkov and foreign scientists J.Stiglitz, J.-L.Truel, C.R.McConnell, S.L.Brue, S.M.Flynn, F.Kotler, G.Armstrong, and others. 3. RESULT AND DISCUSSION The policy of import substitution was a result of the policy of protectionism, developed by theorists of mercantilist theory in the XVI-XVII centuries. The policy of protectionism was aimed at protecting the national economy from foreign competition. K.Marx [1] wrote about the policy of protectionism: «The system of protection was an artificial means of manufacturing manufacturers, of expropriating independent laborers, of capitalizing the national means of production and subsistence, and of forcibly abbreviating the transition from the medieval to the modern mode of production». In Russia, in the second half of the XVII century, the policy of protectionism was adopted by the 2 L.E. Namyatova foremost representative of Russian economic thought A.L.Ordyn-Nashchokin. He issued The New Trade Charter in 1667, which became a major legislative act regulating trade duties [2]. He was the predecessor of Peter I, in whose foreign trade policy was the idea of an active trade balance. Researchers [3; 4; 5; 6; 7] revealed a number of positive and negative aspects of protectionist foreign policy, which characteristics are given in Table 1. F. Kotler, G.Armstrong, and other researchers paid attention to the methods of protectionism in the global marketing environment, noting that when selling goods to another country, a company faces both trade barriers and trade facilitating factors [8]. The idea of import substitution was put forward in XVII century by A.Hamilton (1757-1804), the American statesman and the first secretary of the US treasury in the government of G.Washington, who developed a system of measures to strengthen the US economy and authorized the American national currency - the dollar [9]. In XIX century his idea was developed by the German economist F.List (1789–1846), the author of the book “The National System of Political Economy” (1841), a forefather of a new historical school. He developed the concept of successive stages of production; gave a justification of the active economic policy of the state and the need to unite various individuals and their interaction to achieve the expected results [10]. Table 1: The characteristics of foreign economic policy № List of functions of protectionism policy Authors Positive aspects of protectionism policy 1 Protection of domestic producers from foreign competitors McConnell et al. (2018), Iokhin (2005), Risin et al. (2014), Kosov et al. (2015) 2 Support of development of emerging manufacturers and industries McConnell et al. (2018), Iokhin, (2005), Risin et al. (2014) 3 Stimulation of production and providing employment in the country McConnell et al. (2018), Iokhin (2005), Risin et al. (2014) 4 Ensuring the economic and national security of the state McConnell et al. (2018), Iokhin (2005), Risin et al. (2014) 5 Prevention of reorientation of consumer demand from domestic Iokhin (2005) products to the imported one 6 State revenue generation McConnell et al. (2018), Iokhin (2005), Risin et al. (2014), Kosov et al. (2015) 7 Maintenance of the required level of the country's trade balance Iokhin (2005), Kosov et al. (2015) Negative aspects of protectionism policy 1 The slowdown in scientific and technological progress Iokhin (2005) 2 Neutralization of external competition factors Iokhin (2005) 3 Individualization of structural changes in the national economy Iokhin (2005) 4 Price increase not only for imported but also for similar goods of McConnell et al. (2018), Iokhin (2005), domestic production Risin et al. (2014), Kosov et al. (2015) 5 Redistribution of consumer income in favour of the state McConnell et al. (2018), Iokhin (2005), Kosov et al. (2015) In Russia, the idea of import substitution was adopted by an eminent statesman S.Y. Witte (1849–1915), who was strongly influenced by German economic studies, primarily by F.List. In his book, "National Economy and Friedrich List" Witte justified the program of accelerated industrialization of the country. He considered the rise of agriculture as a “national general economic task,” a basis for industry development [10]. *Corresponding author (L.E. Namyatova). E-mail: [email protected] ©2019 International Transaction Journal of Engineering, Management, & Applied Sciences & Technologies. Volume 10 No.9 ISSN 2228-9860 eISSN 1906-9642 CODEN: 3